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Suppose the MPC in the Economy in Figure 10

Question 111

Multiple Choice

Suppose the MPC in the economy in Figure 10.2 equals 0.75 and the shift from AD<sub>0</sub> to AD<sub>1</sub> was caused by a decrease in investment of $50 billion.What will happen to the equilibrium level of real output as a result of the initial $50 billion decrease? A) It will fall by less than $200 billion. B) It will fall by exactly $200 billion. C) It will fall by more than $200 billion. D) It will fall by less than $67 billion. Suppose the MPC in the economy in Figure 10.2 equals 0.75 and the shift from AD0 to AD1 was caused by a decrease in investment of $50 billion.What will happen to the equilibrium level of real output as a result of the initial $50 billion decrease?


A) It will fall by less than $200 billion.
B) It will fall by exactly $200 billion.
C) It will fall by more than $200 billion.
D) It will fall by less than $67 billion.

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